Pawnbrokers Act to Protect Gold Assets


All pawnbrokers have ever asked for was a fair and level playing field.

For hundreds of years we’ve been treated like second class businesses. A pawnbroker is usually required to record personal identification, and maybe take pictures and collect fingerprints of any person pawning or selling any item. This is mandated by state and local laws. We fill out police reports; we hold all pawns and purchases for a certain number of days. And on and on.

We can’t buy a couple of ounces of gold today from a complete stranger (no questions asked) and sell it before the market closes tonight.

But what about the guy who rents an empty store front, a hotel room, a vacant mall store room, or sets up a kiosk in a mall? He puts out a crude, hand-painted tent sign saying “WE BUY GOLD” and can do as he pleases with little or no regard for the state and local laws others need to abide by. It seems as though the public turns its head the other way when it comes to precious metal buyers.

We’re not even going to touch on reporting the buying of precious metals (or watches and other jewels) to local or state law enforcement, or the reporting of anything to local, state or federal taxing authorities.

Not to mention the fact that pawnbrokers need to use Legal for Trade scales, certified by a state or local government agency, when buying from the public. The corner gold buyer does not have any kind of licenses or permits and may not exist on paper.

Maybe I should correct that last statement. The corner gold buyer may actually have a license; a barber’s license, a liquor license, a vendors license to sell flowers or maybe for auto repair, but not always the required license to conduct his current business.

Even the so-called reputable jewelry stores in your area may not be operating within the confines of the law. We’re not talking about the occasional trade-in. Jewelry stores are finding it harder to make a dollar or two in today’s economy. With soaring gold prices, gold sales are declining or non-existent. The only way many small jewelry stores have been able to survive is through over-the-counter buying. They have their “WE BUY GOLD” shingle hanging out, too.

While many state and local jurisdictions do have laws for second-hand purchasing, most are not enforced. This is what the local buyers of precious metals and traveling hotel buyers are counting on: the lackadaisical attitude of local or state authority. These buyers also know to set up shop in an un-incorporated jurisdiction to further reduce the likelihood of local intervention.

This has gone on long enough. Pawnbroking groups around the country are starting to rebel.

They are doing it the right way. New laws are being passed in states around the country that establish enforceable guidelines for those who wish to purchase precious metals from the public. Quite often these new laws are amendments or additions to the current state pawnbroking statutes. And every now and then, we find that law enforcement shares our views on the subject.


In Illinois, HB 4854 amended the Pawnbroker Regulation Act to include a new section to license and regulate precious metals buyers.  Effective 7/14/2010. A complete copy of HB 4854 may be found at:

FINANCIAL REGULATION (205 ILCS 510/15) Pawnbroker Regulation Act


Sec. 15. Temporary buying locations; unregistered buyers.

(a) For purposes of this Section:

“Temporary buying location” means a location used by an unregistered buyer, including, but not limited to, hotels and motels.

“Unregistered buyer” means an individual business, or an agent of an individual business, engaged in the business of purchasing from the public, scrap precious metals, including, but not limited to, jewelry, precious stones, semi precious stones, coins, silver, gold, and platinum, that conducts transactions at a temporary buying location but is not registered under this Act.

(b) An unregistered buyer that seeks to conduct business at a temporary buying location in this State must comply with all of the following:

(1) An unregistered buyer must register with the sheriff of the county at least 30 days prior to its intention to conduct transactions in that county.

(2) An unregistered buyer must submit by 6 a.m. each day to the sheriff of the county in which he or she is located detailed transaction records for the previous day, which must include purchaser, seller, and inventory information pursuant to subsection (b) of Section 5 of this Act.

(3) An unregistered buyer must pay a registration fee to the sheriff of the county in which it seeks to conduct business. This fee shall be used to defray the cost of reviewing the records required under this Section and may be apportioned as the sheriff sees fit.

(c) The Department of Financial and Professional Regulation may adopt rules necessary for administration of this Section, which must include a fee schedule for counties to follow.

(Source: P.A. 96 1038, eff. 7 14 10.)

Even cities are getting into the act. Chicago Heights, IL has passed a local ordinance, No. 2011-02, An ordinance amending the City of Chicago Heights, Illinois Code of Ordinances and regulating the transfer or conveyance of precious metals and gems to amend the City of Chicago Heights, Illinois Code of Ordinances and regulate the transfer or conveyance of precious metals and gems. The ordinance was passed on February 15th, 2011 and went into effect immediately upon passage. Referenced in City Council meeting:





WHEREAS, the City of Chicago Heights is a Home Rule Unit pursuant to the Constitution of the State of Illinois of 1970, and may thereby promulgate rules and regulations for the benefit of its Citizens; and,


WHEREAS, in order to promote the health, safety and welfare of its citizens, the City of Chicago Heights may from time to time adopt and enact ordinances to achieve those goals; and,


WHEREAS, in order to effectively monitor and regulate businesses which by their nature may facilitate the transfer or disposal of stolen property, and which by their presence may inherently attract a criminal element to this community; and,


WHEREAS, the police department will be better enabled to prevent and investigate crimes involving the theft and disposal of stolen property if written procedures are established regulating the licensing of and record keeping maintained by those involved in the commercial business of buying and selling precious metals and gems;


NOW, THEREFORE, BE IT ORDAINED by the Mayor and City Council of the City of Chicago Heights, Cook County, Illinois, as follows:


Section I: The recitals above are hereby restated and incorporated herein as section I of this Amendment to the City of Chicago Heights Code of Ordinances as though specifically set forth again.

Section II: Chapter 31 of the City Code of Chicago Heights is hereby amended by adding newly created Sections 31-80 through and including 31-90 to be entitled “Precious Metal and Gem Brokers” (hereinafter referred to as “Broker or Brokers”).

Mississippi has instituted HB 1195, an act to regulate the business of purchasing gold and precious items for the purpose of reselling those items in any form. Effective July 1, 2011. A complete copy of HB 1195 may be found at:

HB 1195: Gold and precious items; regulate business of purchasing for resell purposes.

An act to regulate the business of purchasing gold and precious items for the purpose of reselling those items in any form; to define certain terms; to exclude certain businesses from the provisions of this act; to require dealers engaged in the business of buying precious items to obtain a privilege license before engaging in the business, to maintain certain information relating to individual transactions, and to make weekly reports regarding to individual transactions, and to make weekly reports regarding items purchased to local law enforcement agencies; to require dealers to keep purchased items in their original form for fifteen business days; to require dealers to prominently display a copy of this act on their premises; and for related purposes.

The State of Maryland enacted HB 318 to license and regulate secondhand precious metal object dealers. It went into effect October 1, 2010.   A complete copy of HB 318 may be found at:

Business Regulation – Secondhand Precious Metal Object Dealers

FOR the purpose of repealing a certain provision of law authorizing a secondhand  precious metal object dealer to transact business for a certain period of time at a  certain event; providing that a license to do business as a dealer may be used only to benefit the licensee; authorizing only licensed dealers to make certain advertisements; requiring a certain advertisement to include certain  information; requiring dealers to retain the original copy of a certain record at a certain location; authorizing a dealer to request a certain extension; requiring the Secretary of Labor, Licensing, and Regulation to distribute certain information to licensed dealers or post the information on the Department of Labor, Licensing, and Regulation website; and generally relating to regulation of secondhand precious metal object dealers.

In Arkansas, they introduced HB 1841 to amend their state law concerning pawnbroking, precious metal dealer licensing, and the purchase of gold, silver, and other precious metals. Approved 4/11/2011. A complete copy of HB 1841 may be found at:

HB 1841

For An Act To Be Entitled

An act to amend the law concerning pawnbrokers, precious metal dealer licensing, and the purchase of gold, silver, and other precious metals; and for other purposes.



To amend the law concerning pawnbrokers, precious metal dealer licensing, and the purchase of gold, silver, and other precious metals.


Alabama came forward with SB 530 to provide for permit requirements and recordkeeping that would prevent the transient operation of a gold or precious item buying business and to establish criminal codes for violations. Effective July, 2010. A complete copy of SB 530 may be found at:

Transient gold buying businesses, permits, record keeping, penalties


To provide for permit requirements and record keeping that would prevent the transient operation of a gold or precious item buying business; to provide that a violation of this act is a Class B misdemeanor; and in connection therewith would have as its purpose or effect the requirement of a new or increased expenditure of local funds within the meaning of Amendment 621 of the Constitution of Alabama of 1901, now appearing as Section 111.05 of the Official Recompilation of the Constitution of Alabama of 1901, as amended.


Senate Bill 530 as amended by the Committee on Government Operations requires dealers of precious items to purchase a $100 business license annually from the State and a $50 business license annually in each county where business will be conducted. This could increase fee receipts into the State General Fund and to county general funds by an undetermined amount dependent upon the number of businesses that would now be required to purchase the business licenses. In addition, this bill increases the administrative obligations of local law enforcement agencies by a small undetermined amount by requiring that the local law enforcement agencies provide forms for dealers to itemize purchases and by further requiring that those forms showing the itemized purchases be delivered to the local law enforcement agencies at least weekly.

In addition to manufacturers, retail merchants and wholesale dealers, this bill will also exempt pawnbrokers licensed by the Alabama Banking Department.

Lastly, this bill could increase receipts to the State General Fund and municipal general funds from fines; increase receipts to the State General Fund, county general funds, municipal general funds, and other funds to which court costs are deposited; and could increase the obligations of local jails by an amount dependent upon the number of persons charged with and convicted of the offenses provided by this bill and the penalties imposed.

The state of Washington recently passed HB 1716 to regulate secondhand dealers who deal in precious metals. Effective July 22, 2011. A complete copy of HB 1716 may be found at:

Washington Engrossed Substitute House Bill 1716

HB 1716 – 2011-12

Regulating secondhand dealers who deal with precious metal property.

Expands the definition of “secondhand dealers” to include transient secondhand


Requires secondhand dealers to maintain specific detailed records for transactions

involving precious metals for a total of three years.

Prohibits the removal of any previous metal property bought or received in pledge or

by consignment by a secondhand dealer from the place of business for a period of 45

days after the receipt of that property, except when redeemed by or returned to the


Makes it an unranked class C felony to commit a second or subsequent offense that

involves property consisting of a precious metal.
Effective 7/22/11

AN ACT Relating to the regulation of secondhand dealers; amending RCW 19.60.010, 19.60.020, and 19.60.055; reenacting and amending RCW 19.60.066; adding new sections to chapter 19.60 RCW; creating a new section; and prescribing penalties.


NEW SECTION. Sec. 1. The legislature finds:

(1) The market price of gold has increased significantly in recent years and there has been a proliferation of secondhand dealers, including temporary, transient secondhand businesses, engaging in “cash for gold” type precious metal transactions. Frequently, these “cash for gold” type operations are operated by persons desiring to exploit unsuspecting consumers based on current market conditions;

(2) The increasing number of “cash for gold” type transactions in communities and neighborhoods throughout Washington has been linked to increased crimes involving the theft of gold and other precious metal objects, including home burglaries, robberies, and other crimes,

resulting in depressed home values and other threats to the health, safety, and welfare of Washington state residents; and

(3) With the growing number of precious metal transactions, there is a corresponding significant increase in the number of “cash for gold” type storefront businesses, including temporary, transient secondhand businesses, in Washington state which may not be consistent with the growth goals and quality of life sought by communities and neighborhoods and the state as a whole.

Therefore, to better protect legitimate owners, consumers, and secondhand dealers, the legislature intends to establish and implement stricter standards relating to transactions involving property consisting of gold and other precious metals.

While many states have existing laws that regulate precious metal buying (like South Carolina’s Code of Laws, Title 40 – Professions and Occupations, Chapter 54, Dealers in Precious Metals and Ohio’s Ohio Revised Code, Chapter 4728: Precious Metals Dealers), these older statutes do not address the real concerns of the industry today and are often very loosely enforced, if at all.

For example, in Ohio, Chapter 4728: Precious Metals Dealers of the Ohio Revised Code outlines the rules and requirements for Precious Metals Dealers in the state of Ohio. The statute was drafted in the early eighties following the first big gold rush.

This section of law is old, outdated, has too many loopholes and is unenforced. The Ohio Jewelers Association lobbied at the time for exemptions that would exclude all jewelry stores from this statute. These exemptions also make the statute unenforceable for other businesses at the same time. For example, a business is exempt if “the total value of the person’s purchases of jewelry from the public represents less than twenty-five per cent of the person’s total retail sales of articles of jewelry to the public during the immediately preceding year.”

This exemption may have been questionable, in theory, even back in the early 1980s. But today, with gold in the $1,700 an ounce range, jewelry purchases from the public often exceed retail sales for these jewelry buying operations.

The Ohio Pawnbrokers Association has drafted a new bill that is currently being introduced to amend this section of law updated for today’s standards for licensing, reporting and holding of precious metal purchases, much like the Ohio Pawnbrokers Act now requires for pawnbrokers. No bill number has been assigned yet. Hopefully, it will be introduced just after the November elections and passed this session.

If your area is over-run by gold buyers who are not following the laws and ignoring the standards you are required to meet, and if you are tired of playing second fiddle in the returns-on-investment area of precious metals buying because of holding periods, you may have to be the one to take the first step to correct things.

Don’t be shy. Get copies of all the laws and ordinances mentioned in this article and sit down with your local state representative or senator. Ask how you can get a similar law instituted in your state. You may find that many political leaders are willing to jump at an opportunity that will actually benefit their constituents.

Granted, it might not hurt to drop a few gold coins into your rep’s campaign fund, but you will find that any money spent on this endeavor will be returned to you many times over when 80 percent of the unlicensed metal buyers are shut down and others, after finding they need to hold their purchases for seven to thirty days, may change their business model.

It takes a few dollars in the bank to have your money (metals purchases) sitting in limbo for a holding period before you may sell it. And then, you find out gold has dropped $200 an ounce since you bought it. Welcome to our world!

Ric Blum is a vice president of Ohio Loan Co. in Dayton. He has served as president of the Ohio Pawnbrokers Association, secretary/treasurer of the National Pawnbrokers Association and as a member of the board of directors and the board of governors of the National Pawnbrokers Association. Please feel free to e-mail your comments to or mail them to Ric Blum, Ohio Loan Co., 3028 Salem Ave., Dayton, OH 45406.

Leave a Reply

Your email address will not be published. Required fields are marked *